Bringing accountability to responsibility: The new challenge for corporate social responsibility

Qantas Social Impact Lecture

Speech, E&OE — Check against delivery

6 October 2011

I begin by acknowledging the first Australians on whose land we meet and whose cultures we celebrate as among the oldest continuing cultures in human history.

I am delighted to be here this to deliver this Social Impact Lecture — and the particular role of corporations.

This lecture brings together under the one roof:

I believe that it is in this space — the partnership between government, business and civil society — that corporate social responsibility can find the most effective response to many of the challenges and opportunities we confront, both at home and abroad.

In looking at the concept of corporate social responsibility, I think it's worth reminding ourselves how far we have come in such a short time.

It was only in 1970 that Milton Friedman wrote: "the social responsibility of business is to increase its profits".

That is, one responsibility only: to the stockholder.

Despite Gordon Gecko's best promotional efforts, in the 1980s the term "corporate social responsibility" began to emerge.

The responsibility of business was enlarged.

It shifted significantly from exclusively focusing on stockholders to encompass the widened focus of stakeholders — those affected by a business's past, present and future activities.

It recognised that a company's returns on investment must also be considered in the wider context of that company's economic, social, and environmental obligations.

Otherwise known as the triple bottom line — people, planet, profit.

Back then, companies began working to improve their brand image by being seen to be engaged with a wider public agenda.

Today, corporate social responsibility is becoming more mainstream.

It is picking up structure, becoming codified.

No longer is it a discretionary decision as to whether they can be socially responsible.

Community expectations now require that they be socially responsible and accountable.

Required by shareholders.

Required by customers.

Required also by employees who legitimately wish to be involved in something bigger than the bottom line.

Of course the key question for all three is whether the company is genuine in its defined CSR objectives.

Or whether it is simply window dressing.

And this is often expressed in the percentage of profits dedicated to CSR — publicity budgets excluded.

On this, the Australian public have a very discerning eye and have a unique capacity to spot a fraud at 100 paces.

No longer at the margins, genuine corporate social responsibility now rightly belongs as a core part of business strategy.

There is now a growing body of practice that gives substance, meaning and accountability to corporate social responsibility that is real, not confected.

It comes in three types.

  1. First, what you might call de minimis CSR — obeying the environment, labour and anti-discrimination laws.
  2. Secondly, there is another front, what you might call the growing body of international corporate social responsibility best practice — that is, a growing body of codes and guidelines some with supporting organisations that help businesses avoid doing the wrong thing, even in countries where the legal and regulatory regime might be weak.
  3. Third, there is positive corporate social responsibility — where companies are themselves actively looking at how they can contribute well beyond any mandatory or non-binding set of requirements they may face.

Of course, the cornerstone of CSR is that companies adhere to the letter and spirit of formal legal obligations.

Wages and working conditions, as set out in the law of the land.

If companies do not act fairly with their own employees, consistent with industrial laws, they will not be believed more broadly on any matter of corporate social responsibility.

This is something that all corporations must reflect on — all corporations.

Australian's have an acute sense of a fair go for all when it comes to any significant corporation — including the question of executive salaries and their relationship with both broader equity on the one hand, and actual corporate performance on the other.

They have a sense of a fair go when it comes to environmental rehabilitation — the legal requirements that are placed on companies, such as mining companies, whose operations are disruptive to the local environment in which they operate.

Paying proper taxes without engaging in elaborate tax avoidance schemes is also a basic public obligation.

Fundamentally, this is de minimis CSR.

But increasingly de minimis CSR is not seen as adequate.

Not only in the minds of shareholders, stakeholders and citizens.

But increasingly in agreed codes of practice in which peak bodies or senior government agencies seek to provide guidance to member companies.

Increasingly, national and international systems are requiring some form of corporate social conscience.

What the international lawyers call "soft law" is developing.

Let's look at some examples.

But beyond these forms of corporate social responsibility there is a broader emerging agenda as well — a move beyond simple bad practice avoidance to the development of new innovative forms of positive corporate behaviour around the world.

The Global Alliance for Vaccines and Immunisations — going by the acronym of GAVI — is an excellent example.

GAVI is saving lives — particularly the lives of children — by working to improve access to immunisation in poor countries.

Acknowledging that governments of poor countries cannot afford big vaccine programs on their own, GAVI has for the past decade brought together a public-private partnership of actors: corporate, government and international agencies.

The GAVI business model helps drive down vaccine prices by mobilising financial resources, pooling demand, attracting new manufacturers and stimulating competition.

This delivers real results, the weighted average price of pentavalent vaccine in developing countries has dropped almost 30% over the last four years.

So it isn't just the state being responsible for the health needs of its citizens.

It is civil society more broadly taking responsibility for saving lives.

And within this process, recognising also a legitimate role for the corporate bottom line, although often with reduced rates of return to make such social investments possible.

The ANZ Bank — keen to grow its business in our region — is helping to bridge economic divides within countries.

It has established a growing microcredit program in Fiji and its operations in Cambodia assist families to return remittances from urban to rural areas at reasonable rates.

This picks up on the work of our 2008 Senior Australian of the Year, David Bussau.

His innovative microfinance approach to addressing the root causes of poverty through responsible wealth creation now stretches across 29 countries.

His operation is not-for-profit but run on the basis of a self-replenishing fund.

These sorts of initiatives draw explicitly on the core commercial expertise of participating firms, giving programs a sharp business focus, rather than the blunt instrument of grant aid that does not change behaviour.

Furthermore, where there is joint funding participation by government to defray or reduce commercial risk to positive-pointing firms, it drives the aid dollar further.

There is a growing number of examples of companies that are moving to make sure they are doing the right thing — taking ethical action — and making sure they are seen to be doing the right thing.

And let's not forget that companies are made up of people who sit at the board table and management desk making decisions — and everyday making ethical decisions that have consequences.

Here I am reminded of the wonderful story of an Australian woman named Jill Ker Conway, born in Hillston in outback New South Wales.

Jill has lived in the United States for some years now and today serves on the board of Nike.

As a friend of mine who met up with Jill in Boston recently wrote:

"She had been receiving considerable public criticism for being on the board of Nike when the company was exploiting women workers in sweatshop conditions in countries like Indonesia.

She stayed on the Nike board with the specific intention of improving the lot of those women in those sweat shops.

Even though the improvement of their conditions would adversely impact on the Nike bottom line, Conway was adamant that the company had to do the right thing.

In part because of her advocacy, the company did change its way, opting more to do the right thing."

And as the latest corporate responsibility report from Nike notes: "We saw that doing the right thing was good for business today — and would be an engine for our growth in the near future".

I don't seek to exonerate all Nike corporate behaviour today, but it would be foolish not to recognise significant improvements when they occur.

An example of closer to home is Cadbury.

This company sources cocoa beans — the key ingredient for its chocolate — from West Africa's Ghana and Cote d'Ivoire; two countries that are the world's largest cocoa producers.

They've been found guilty by the United Nations of exporting cocoa made by trafficked and enslaved children.

World Vision's Tim Costello saw this for himself when he visited these countries in 2008 — images of children being tortured and beaten if they tried to leave the harvesting fields.

It wasn't front page news at the time, but on the 26th August 2009, Australian consumers chalked up a great ethical victory.

Cadbury announced that its dairy milk chocolate bars would carry the Fair Trade logo.

And since Easter last year they have.

As the then boss of Cadbury, Mark Callaghan, remarked at the time:

"We have to guarantee these farmers a better price than what we would normally pay for cocoa".

In return farmers must deliver good environmental and labour practices — which means no forced labour or child exploitation.

Clearly that's a move that responds to a bottom-up demand for higher ethical standards — about what is fundamentally right — in the production of chocolate.

Again, I don't see the need to give a clean bill of health to the cocoa trade, but it is important to recognise improvements where improvements have occurred.

What we are starting to see is the beginnings of a broad trend towards greater corporate responsibility and a broader sense of ethical awareness in business.

But when business conditions are tough, we have to be careful that CSR is not simply tossed aside.

It is important that the global economic crisis does not undermine the positive trajectory of CSR.

In the global financial crisis of 2008 banks, insurance companies, car makers — suddenly, all sorts of parts of the private sector — were considered too critical to fail.

This acknowledged that we are not living in a world where markets can simply "let rip" in their purest form — the common good requires us to take a broad approach.

And the corollary of that public investment by the government is for the corporate sector also to have due regard for the common good — to our nation's broader social and environmental goals.

There is a possibility of evolving a broader culture of mutual responsibility between governments, corporates, and the community — as opposed to a simple binary culture of labour versus capital.

In this country, some parts of our corporate sector are doing well.

And that is shown by the strong profits they have been delivering over the years.

Banks and mining companies come readily to mind — with UBS predicting a combined banking industry profit this year of $21 billion.

The way the GFC played out — the way in which the public sector carried the can for many of the risks various parts of the private sector had been taking — has also changed the public landscape.

The public has a continuing and legitimate expectation that the corporate sector will play its part, as partners of both government and the community — beyond formal taxation obligations, which of course remain fundamental.

Remember, government, on behalf of the taxpayer, has also acted to support the corporate sector at times of crisis — be it through financial stimulus, sovereign guarantees for bank deposits and inter-bank loans, as well as temporary investment allowances for capital purchases.

It therefore becomes critical that we can accurately measure the outcomes of the corporate world in terms of its broader responsibilities.

CSR has become expected, and it is starting to be codified. Now it needs to be better measured.

Because in my experience, what gets measured, gets done.

But how do we measure it?

I know that this is still an evolving area of thought — and that the Centre for Social Impact is closely involved in that work.

Social return on investment is one approach, seeking to find a monetary measure for the social value created by specific programs.

The London Benchmarking Group has its Corporate Responsibility Index, which is used by many companies.

International Integrated Reporting is another approach.

A standard for triple bottom line reporting has been developed through the Global Reporting Initiative — Westpac's sustainability reporting is prepared on the basis of these standards.

And there are a range of ratings tools in play: Dow Jones sustainability indexes, FTSE4good, Covalence Ethical Rankings, which look at tracking the ethical reputation of corporations.

It would be useful for corporate Australia, perhaps through its peak bodies, to standardise corporate reporting for CSR so that all Australians can judge and compare what our leading corporates have been up to.

Of course, absent this, there are already great examples of people making a difference across Australia.

Take, for example, the Clontarf Foundation.

They work to improve educational outcomes for young indigenous men through mentoring and support for schools.

It is not a government organisation, but a group that draws its funds from the corporate sector, as well as state and federal governments.

It has made a significant difference to the lives of indigenous communities in the few short years it has been operating.

At Broome Senior High School, in 2005 there were 47 male indigenous enrolments, with an average attendance of 55 per cent.

Last year 113 male indigenous students were enrolled — and attendance had lifted to 77 per cent.

The principal at Broome acknowledges Clontarf has helped keep kids at school.

One key ingredient is providing AFL training on the condition of 80 per cent school attendance.

There are now 45 academies, supporting 2, 568 Aboriginal students, with a general school attendance rate of 80 per cent.

In addition, 75 per cent of graduates are in full-time employment within one year of graduation.

In August 2008, I announced the 50,000 jobs campaign — an initiative of business leaders, government and Indigenous leaders to create demand for Indigenous employment enshrined in the Australian Employment Covenant.

One of the Covenant's great strengths is its focus on industry and private sector employers as the drivers for change.

The Covenant now has 315 employers signed on, and states that it has up to 60, 000 jobs committed.

It has moved from focusing on signing new partners into the program to the implementation stage.

In March 2010 I was honoured to attend the launch of Generation One — the movement to end the disparity between Indigenous and non-Indigenous Australians in one generation.

Founded by Andrew and Nicola Forrest, with financial support from other prominent business leaders such as James Packer and Kerry Stokes, the movement has grown to over 123,000 Australians.

This movement is harnessing the groundswell of public sentiment that followed the Apology to the stolen generations for practical measures to close the gap, particularly around sustainable employment — backing in the work of the 50,000 jobs campaign.

Generation One is focussing its campaign on the supply of Indigenous candidates for these jobs, advocating for more flexible funding to assist the long term unemployed to enter and stay in the workforce.

There is no magical solution here — but as a nation — business, government and the community — at last seem to be marching in the right direction on a key task for our generation — overcoming indigenous disadvantage.

A further public/private initiative to support this is the Australian Indigenous Education Foundation.

One of the AIEF's key strategies is to provide scholarships for Indigenous secondary school students from rural and remote areas to attend boarding schools in major cities around Australia.

Secondary school options for many Indigenous students, particularly in remote areas, can be limited.

This was a $20 million contribution from the government back in 2008/09 that was to be matched by the AEIF.

I am told that the AEIF have nearly raised that — and most certainly will do so before this year is out.

The AEIF has grown from 1 scholarship in 2008 to 43 in 2009 to 150 in 2010 and over 200 this year.

It now works in partnership with 24 leading boarding schools in NSW, QLD and WA.

This initiative is providing many families with the choice of sending their child to a high-performing secondary school, which will bring with it access to quality learning environments and educational opportunities that might not otherwise be available.

We need to be preparing the young Aboriginal leaders of tomorrow.

In many ways these projects are pointers to what I see as the next wave of CSR.

There's a critical commonality here: partnership.

Each of these projects points to a greater three-way collaboration between government, business and the NGO sector.

Government has an important role to play in creating better enabling environments to support CSR.

Companies working with NGOs can better structure their own CSR activities — and for that matter, bring a business focus to NGOs themselves.

And NGOs are bringing natural talent and commitment to the task.

This is also what the government is seeking to do globally through the aid budget.

That is why I enthusiastically agreed with the outcome from the Independent Review of Aid Effectiveness that recommended the need for closer partnerships between business, government and NGOs in the development task abroad.

I specifically adopted the review panel's recommendation of "harnessing the power of business" and I am delighted that the first annual consultative forum with business on aid collaboration will take place next year.

This concept of partnership also informs what we seek to do as a government on the home front.

We believe in a socially inclusive society in which all Australians feel valued and have the opportunity to participate fully in the life of our society and economy.

As the Minister for Social Inclusion, Tanya Plibersek has been driving the agenda that looks to make sure Australians have the opportunities they need to participate in education, to work, to engage with other people, and to have a voice in things that matter to them.

But the key to its success is the power of partnership.

Not corporate social responsibility that acts as a fig-leaf, building a brand, or satisfying a perceived consumer imperative.

But partnership that makes a real difference to the community in which companies operate.

Ultimately, this is the same ethos behind our work in establishing a National Compact with the not-for-profit sector, which was canvassed by my Senator colleague, Ursula Stephens when she was the relevant Parliamentary Secretary.

Finding new and better ways to work together to build the social capital in our communities.

We've come a long way from Milton Friedman.

We've moved beyond actions that will give us a simple, short-term, positive boost relative to our competitors.

Many companies — or more precisely individuals inside these companies — are going beyond minimum legal requirements and obligations in order to action the needs of our world, both at home and abroad.

There is still much more work to be done to ensure that profits, social responsibility and our responsibility to the planet proceed hand in hand.

Corporate social responsibility — now in the mainstream — must maximise the contribution of business to achieving this common good.

Ultimately, it reflects our basic values of a fair go for all.

And if we do it well, we will surprise ourselves by the differences we can make in this troubled world of ours — a difference we can make for the better.

END

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